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    China-Pakistan embroiled in major disagreement over CPEC funding

    Synopsis

    Serious disagreements have surfaced between the two countries over the Main Line 1 (ML-1) railway project. China is expected to lend $6 billion of this, which Pakistan wants to borrow at a concessional interest rate of less than 3%. But China is reluctant to lend money for ML-1 as it fears that local politics will delay returns on investment for China.

    Agencies
    The other major disagreement between Beijing and Islamabad delaying the JCC meeting relates to SEZs, sources told
    China and Pakistan are believed to be involved in their most serious disagreement over the mega Belt and Road Initiative following which the annual bilateral summit of the China-Pakistan Economic Corridor () has been delayed.

    Serious disagreements have surfaced between the two countries over the Main Line 1 (ML-1) railway project and special economic zones under CPEC, ET has learnt. ML-1 is the largest CPEC project and worth $6.8 billion. China is expected to lend $6 billion of this, which Pakistan wants to borrow at a concessional interest rate of less than 3%. But China is reluctant to lend money for ML-1 as it fears that local politics will delay returns on investment for China, ET has learnt.

    CPEC is governed by the Joint Cooperation Committee (JCC). It is jointly chaired by Pakistan's minister for planning, development and special initiatives and the vice chairman of China's National Development and Reform Commission. The first JCC meeting was held in August 2013 and the last in November 2019. The 10th JCC was scheduled for early 2020 but could not be held due to disagreement between Beijing and Islamabad.

    Asad Umar, Pakistan's minister for planning, development and special initiatives, told local media in November that the 10th JCC would be held the following month. However, sources informed that meeting could not be held yet.

    China extends of concessionary and commercial loans for big projects under BRI. "China is reluctant to lend money for ML-1 because Pakistan has already sought debt relief to meet G-20 lending conditions and it is not in a position to give sovereign guarantees," Nasir Jamal, a senior journalist in Lahore covering business and the economy, told leading Nikkei, a leading media outlet from Japan.

    Andrew Small, a senior trans-Atlantic fellow with the Asia program at the German Marshall Fund, a U.S. think tank, told Nikkei "China is much more comfortable deferring payments or providing new financing than it is offering concessional rates in the first place. This approach provides Beijing with greater leverage and control even if they are willing to be very flexible at the back-end.”

    Earlier this month, Pakistan Railways asked the government for 11 billion rupees ($69 million) to provide ML-1 security. It is hard for Islamabad to extend a large amount given the state of the economy and severe budgetary constraints.

    The other major disagreement between Beijing and Islamabad delaying the JCC meeting relates to SEZs, sources told ET. In the second phase of CPEC scheduled for 2020 to 2025, Chinese companies are due to start producing goods in Pakistan and exporting from there.

    In the past, JCCs were always held in time, and China agreed to Islamabad's requests most of the time. There were plenty of announcements about CPEC last year, but implanting it is another matter.

    Pakistan is currently renegotiating its $6 billion extended fund facility with the International Monetary Fund (IMF), which was suspended last April. The IMF reportedly will only resume the program if Pakistan does not borrow any new commercial loans, and this is one of the reasons it is looking for concessions on loans for the ML-1 project.
    ( Originally published on Jan 23, 2021 )
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    26 Comments on this Story

    Neeraj Kumar32 days ago
    Tariq, Obsession is not about media which is more for TRP. Take an example, India is more obsessed with China in terms of defence capability but it will not name it mostly because we don't want to provoke a big nation. We give lot of focus on Pakistan in media because we can escape with rhetoric and insults we heap on Pakistan. Pakistanis talk a lot about atrocities on Muslims in Kashmir but they don't mention China at all despite the fact that what Chinese are doing are much worse than what Pakistanis accuse Indians of. Why it is so? Pakistan has compromised with every country in the world- USA, Russia, Israel, China- and it has hurt it no ends. But Pakistan can't make compromise with India, it is still waiting that someday India will get balkanized, go weak or Muslims of India will revolt etc. or some international organisation would force India to make concessions and all.. this is what we call obsession with India.
    T. R. Bhandari32 days ago
    No wonder Pakistan finds itself in such a sorry state.All this is the result of religion driven Kashmir phobia created by the elite and corrupt ruling class which has survived and thrived on this opiate for masses who remain enslaved and exploited by the feudal landed classes. Army has emerged as the largest mafia with a democratic facade losing the strength of both autocracy and democracy. There are on a slope and rolling down fast to fall in the credit cage of China and lose their sovereignty. May be Chinese set them right by their conditioning camps.Otherwise, the only solution is to seek and find with India, close the Kashmir issue by accepting LOC as border, open trade, allow land route to Afghanistan,Iran, and further west opening up the possibility of another EU kind of organisation ,Chuck Sharia law and come down heavily on fringe elements, Else it's balkanization is inevitable but the upheaval may have severe implications for the entire region.
    Tariq Ahmed33 days ago
    Arun, obsession with India? How you determine who is obsessed with who? Ok let’s watch Tv media and printing press ! Have a look at Pakistani Tv talk shows and compare them with India you will find out who is obsessed with who ! Remember Pakistan can and will come out of the economic mess, it is only matter of time and not when , while India ! Pakistan need no obsession as long Modi , BJP RSS is sty in power. Balkanization of India is all but in process no foreign powers need to pay attention .
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